Heritage Foundation: Deficit Driven By Overspending, Not Lower Revenue
June 23rd, 2010
Heritage Foundation: Deficit Driven By Overspending, Not Lower Revenue
Published on June 23rd, 2010 @ 03:03:18 pm , using 1327 words
By Amanda J. Reinecker
Overspending Causes Deficits. Period.
Let's get one thing straight: The dramatic increase in the federal deficit -- which will rise to 8.3 percent of gross domestic product by 2020 -- is exclusively the result of higher spending, not lower revenues. Long term, this higher spending will be driven by entitlements, particularly the rapid and unsustainable growth of spending on Medicare, Medicaid and Social Security).
All too often, the left argues that rising deficits are the result of too-low taxes, so we must therefore increase taxes to reduce the deficit. This is exactly the left's argument today. But this is the wrong diagnosis.
Heritage Foundation budget expert Brian Riedl debunks several progressive distortions about the federal budget. In a report complete with charts and in-depth, fact-filled analyses, Reidl, Heritage's Grover Hermann Fellow in Budgetary Affairs, debunks the major myths one-by-one.
Myth #1: The 2001 and 2003 tax cuts wiped out the $5.6 trillion surplus for 2002–2011.
Fact: The tax cuts caused just 14 percent of the swing from projected surpluses to actual deficits.
Myth #2: Future deficits are "the result of not paying for two wars, two tax cuts, and an expensive prescription drug program."
Fact: These policies play a relatively minor role in the growth of future deficits.
Myth #3: Declining tax revenues are driving future deficits.
Fact: Rapidly increasing entitlement spending will cause nearly 100 percent of rising long-term deficits.
Successfully eliminating the deficit and balancing the budget requires drastic reforms. As the President's deficit commission assembles recommendations to reduce our long-term deficit, it must target the historical levels of taxes (18.0 percent of GDP) and spending (20.3 percent of GDP).
In his paper, "The Three Biggest Myths About Tax Cuts and the Budget Deficit," Riedl details several necessary changes, which include:
- Reforming Medicaid and bringing long-term sustainability to Social Security and Medicare;
- Unwinding the bad policies in the health care law;
- Offering specific spending reforms, not just numerical targets;
- Avoiding tax increases; and
- Bringing transparency to the federal budget.
"Growing long-term budget deficits are exclusively the result of rising spending, not declining revenues," concludes Riedl. "Thus, common sense suggests that most reforms should occur on the spending side." In other words, the federal spending spree needs to end.
The New START Treaty Should Be a Non-Starter
"Welcome to the world of multiple proliferation," writes Heritage national security analyst James Carafano. "With so many fingers on so many buttons, it is not a neighborhood Mr. Rogers would like."
We're on a road to disaster and the New START treaty between Russia and the United States only accelerates our pace. Carafano explains to Washington Examiner readers why the Senate should not ratify this harmful treaty: "It's a bad agreement. It makes Russia a more dominant nuclear power, and it makes Russia more, not less, dependent on nuclear weapons."
All the while, the New START dangerously reduces our nuclear arsenal and potentially weakens our missile defense capabilities.
» What do you think? Submit your comments on the Washington's Examiner's website.
Last week, the Senate Foreign Relations Committee held hearings on the treaty. Prior to the hearings, Heritage's Steven Groves advised Senators to ask four key questions:
- What assurances did U.S. negotiators give to the Russians regarding the U.S. missile defense program?
- In what way does the preambulatory language in New START affect U.S. missile defense?
- Were any side agreements made regarding future U.S. missile defense that would affect U.S. capabilities, either quantitatively or qualitatively?
- Wouldn't access to the negotiating history for the treaty enlighten the Senate regarding what was discussed concerning U.S. missile defense?
Of these questions, two were addressed. In response to question three, Rose Gottemoeller, a key negotiator in the START treaty, stated "unequivocally
that no backroom deals were made between the United States and Russia regarding missile defense. And in response to question four, Gottemoeller insisted there was no historical precedent for releasing the records, a claim properly challenged by Sen. Jim DeMint (R-SC). She went on to say that releasing such records has the potential to weaken the stance of negotiators in the future.
The treaty could also limit America's ability to protect herself from nuclear attack. But another witness told the Senators that "a comprehensive missile shield is not practical." This is an alarming stance held by an official tasked with overseeing such an important treaty concerning strategic weapons.
> Heritage Work of Note
- It is a crime to provide material support to terrorists and Congress has a right to say so, the Supreme Court ruled yesterday in Humanitarian Law Project v. Holder. The decision is a good one -- a bit obvious, but good. However, Heritage legal scholar Paul Rosenzweig explains, the fact "that it took more than 10 years to reach this conclusion, and that three Justices dissented from it, says more about the ways in which lawyers construct arguments that only lawyers can believe in than it does about the reality of the world we live in, in which terrorist activities abound."
International law activists attacked the ruling, insisting that it violates free speech rights. But as Rosenzweig writes, "characterizing the provision of material support to a foreign terrorist group as 'free speech' simply because some speech is involved does not cloak it with First Amendment protections any more than teaching a terrorist how to make a bomb is free speech." The Court got it right.
- World leaders need to focus on creating an economic environment that promotes competition, not the "harmonization" of global policies, Heritage economist Anthony Kim recommends as nations prepare to meet at G-20 summit. Competition between national markets fuels economic growth because it promotes entrepreneurship and innovation. "If President Obama and other leaders of the G20 are genuinely serious about restoring economic growth during the upcoming Toronto summit," writes Kim, "then they should renew their commitment to economic freedom…and provide more than the standard photo op."
- Columbia's new president-elect, Manuel Santos, finds himself in a challenging position. Under Santos, who takes office on August 7, Columbia will need to "strengthen democratic institutions, advance an impartial justice system, put the economy on a high growth track, and battle poverty; all while protecting Colombia's security against drug traffickers, common crime, and the narco-terrorism of the Revolutionary Armed Forces of Colombia, still the largest armed terror group in the Americas," writes Heritage Latin America expert Ray Walser. Santos seeks a reliable partnership with the U.S. "But the Obama Administration's current two-step in Latin America involves emphasizing ties with friends while trying to dance with tyrants like the Castro brothers and Hugo Chavez." The administration should do more to keep this hemispheric ally on our side.
- Vince Kolber, the new chairman of the Chicago Committee for Heritage, spoke this week with WBEZ radio about the growth of the conservative movement and how conservatives are faring in Chicago. Listen to his motivating remarks, which begin at minute 32.
> In Other News
- House Democrats won't pass a budget in 2010, Majority Leader Steny Hoyer (D-MD) said today. In prepared remarks, Hoyer says it "isn't possible to debate and pass a realistic, long-term budget" until Congress sees the debt commission's report in December.
- Despite addressing the country from the Oval Office last week, President Obama hasn't convinced Americans that he has a solution for the Gulf oil spill. A new poll shows 59 percent of Americans believe the President does not have a clear plan for dealing with the disaster.
- White House budget director Peter Orszag is quitting his job in July, making him the first of President Barack Obama's top advisers to leave the administration.
- The White House's war strategy in Afghanistan may be in jeopardy. As a result of statements to the media, NATO Commander Gen. Stanley McChrystal has been summoned back to Washington to face President Obama and Defense Secretary Robert Gates, who could remove him from command, or reprimand or demote him.
Amanda Reinecker is a writer for MyHeritage.org—a website for members and supporters of The Heritage Foundation. Nathaniel Ward, the Editor of MyHeritage.org, and Stephen Congdon, a Heritage intern, contributed to this report.





